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Using Quicken 2011 for Trust Accounting

Years ago my friend and colleague Dee Crocker developed instructions for using Quicken for lawyer trust accounting. Granted, Quicken is not a full-fledged accounting program – no dispute there – but it is often the only affordable solution for lawyers opening a new practice. Recently I updated our detailed instructions for setting up a trust account in Quicken 2011. Here are the highlights:

Setting Up an Account

Use the “Advanced Setup” feature when creating your account. This allows you to enter transactions manually instead of connecting to your bank online. Create the account using the first day of the month when your account was opened. For example – if you opened your trust account on January 10, 2011, use January 1, 2011 when you set it up in Quicken. Begin with a zero balance.

Customizing the Toolbar for the Law Office

Once the account is created, the next step is to customize the toolbar. Ask to see all toolbar choices, then add “Tag List” and “Reconcile an Account…” to the toolbar. The Tag List is the means by which individual client funds are tracked. (More on that in a moment.) Adding it to the toolbar makes it easier to associate deposits and payments with a particular client or matter.

Categories

Next, add appropriate law office income and expense categories. For example, create Income categories for Retainer and Settlement Funds. Create Expense categories and subcategories for client costs.

Entering Transactions using the Tag List

The key here is to use the Tag List. (Remember we added this feature to the toolbar?) As each transaction is entered, it is categorized. While in the category field, click Tag List in the Quicken toolbar and select a client from the Tag List. If the client does not already appear, he or she can easily be added. Finish the transaction, hit <enter>. By tagging transactions, you can easily track payments and deposits on each client’s behalf.

Creating Reports

You can reap the benefits of using the Tag List when you create and run reports. Select Reports > Banking > Transaction. Modify the standard Transaction Report by including all dates in the date range and asking Quicken to subtotal by Tag and sort by Account/Date. See the complete instructions here. Save the modified report, add it to your toolbar for easy access, and you’re ready to go. Here is a sample report:

To see transactions for one client only, access your saved Report, click on Customize, then click on Tags. Select “Clear All,” then check the desired client’s name, and click OK.

Parting Thoughts

Is this double-entry bookkeeping? No. Does Quicken do time and billing? No. Is this a pretty basic solution to trust accounting? Absolutely! And that’s the beauty of it for some folks. It fits their pocket book and their comfort level with technology. If you think you might want to use Quicken for trust accounting, see the step-by-step instructions here.

Beverly, I am a lawyer in Birmingham, AL and I appreciate the information that you have shared about using Quicken for trust accounting. I wanted to follow up with you to inquire as to whether your firm used this trust accounting solution in conjunction with using Quicken to manage its own books and, if so, see if you have any advice. For the longest time, I was using excel and then I wanted to use quicken since I already had it for my personal finances but I am having some trouble setting things up. Any advice you can give would be greatly appreciated!

Thank you for this information. As a new solo, I am also trying to use Quicken to manage my books as well as trust accounting, but am having difficulties setting up transfers and still getting proper reports. Any advice would be much appreciated. Thanks.

I am setting up QuickBooks for an attorney who has been using Quicken. I have set up the operating account, but the client (atty) wants to keep the IOLTA Client Trust on his Quicken and I want to get the BS from his 2012 1120S entered into QB. i do not want to recreate all the YTD transactions, but I thought I could have the balances for the 12/31/12 and the balance of IOLTA Clients accounts TYD at July 31 and enter August transactions. How can the CPA prepare the 1120S tax return when all is not in one file? IOLTA in Quicken and Operating in QB. I never had this happen before. ANY suggestions. I am about to suggest he contract another bookkeeper/accountant.

Hi Cathy,
I can understand your frustration. Not sure why he wants to use QuickBooks for his operating account and Quicken for his Trust Account – seems like this would lead to extra work. For example, client has funds in a retainer account tracked in Quicken with disbursements and deposits recorded there on the client’s behalf. Separately, those transactions must be folded into QuickBooks so they appear on the actual client bill and get credited or debited from the client’s account receivable account. Whew!
Regarding the year-to-date IOLTA client balances – do you mean you wish to take those balances from QuickBooks and start tracking them in Quicken? If so, I would enter them into Quicken as a deposit for each particular client and go forward from there. For example, Clients A, B, and C have July 31 trust balances of $200, $300, and $500 respectively. Enter an August 1 deposit for Client A in the amount of $200, a $300 deposit on August 1 for Client B, and a $500 deposit on August 1 for Client C. In Quicken, client trust funds are tracked and identified by using the “Class” feature – each client is a class and you enter the Class whenever you post a transaction – OR funds are “tagged.” The “Class” feature appears in older versions of Quicken; the tag list approach is used in newer versions of Quicken. If every transaction is tagged (or the proper class used) then Reports can be generated showing all client trust activity or a particular client’s trust activity. I would have to know which version of Quicken the lawyer is using. I can then send you the instructions for setting up a lawyer trust account in Quicken. Make sense?

Beverly, thank you for such a complete and detailed set of instructions!
I am a bookkeeper for an attorney that wants to migrate from Excel to QuickBooks and I’m trying to talk him into a simple Quicken conversion instead.
Any up-to-date information on using Quicken for IOLTA and Law-Firm-Business accounting would be appreciated.
Thanks!

Hi Vince,
I continue to believe Quicken is a straightforward, simple solution for trust accounting.

It doesn’t require a sophisticated understanding of a complex program (QuickBooks); It is almost impossible to screw up (anyone can grasp setting up client matters in a tag list and tagging transactions); Best of all it is cheap.

There are two bonafide reasons to get QuickBooks: you need it to do payroll and you’re willing to compromise to get an “okay” billing program. If the lawyer for whom you work does not need either of these functions, QuickBooks would be a waste of money.

I am aware that many CPAs encourage clients to get QuickBooks because they know it. However, not many lawyers are also CPAs. 😉. What good does it do to buy software you don’t understand?

I also hear the argument that Quicken cannot replicate true debit/credit double-entry bookkeeping. This is true, but how many lawyers (especially solos) pay attention to anything other than cash-based accounting?

In many instances, Quicken is the better choice. I would far rather have a lawyer buy a simple, easy-to-use program I know they will stick with.